Navigating Loans for NRIs in India

The below content is purely for informational purposes and is not intended to constitute advisory of any kind. Please note, these are in-depth articles which are best viewed on large screen devices like laptops, desktops and tablets. The position reflected in this article has been updated as of March 31, 2024.

As a Non-Resident Indian (NRI), Overseas Citizen of India (OCI) or Person of Indian Origin (PIO), at times, you may seek financial assistance for your real estate investments or for taking care of your families back in India. Like resident Indians, you can avail a variety of loans such as home, car or personal loans etc., as per your needs.

This article explores the available loan options, key considerations and tax implications to help NRIs make informed decisions.
 

Types of loans for NRIs
 

1. Home loan

NRIs can avail home loans in India to buy residential or commercial properties including purchase of land for property construction. Like resident Indians, they can also avail other home loan products such as transferring balance of an existing loan to a new lender, taking a top-up/additional loan on existing loan for additional work including home renovation, customisations to the property etc. Please note, they are not eligible to purchase agricultural land, plantation property or farmhouses in India. 

Click here to read more about investing in real estate as an NRI.

How to apply for a home loan 

NRIs can apply for home loans in India without being physically present. Leading banks like ICICI Bank allow NRIs to apply for home loans digitally through internet/mobile banking and assign a dedicated Relationship Manager (RM) based on location. The e-signing facilities allow NRIs to apply and have their home loans sanctioned digitally. However, for disbursement, NRIs have to be either physically present in India, or have a Power of Attorney (PoA) holder act on their behalf to complete the formalities. Subsequently, the loan will be disbursed online, and the funds will be credited to their bank account.

Tax implications on home loans

Income tax on home loans in India is the same for NRIs and resident Indians. 

Under Section 24 of the Income Tax Act, 1961, you can avail deductions, such as property taxes, standard deductions and interest paid on home loans as per your opted tax regime.

If you have opted for the old tax regime and have a self-occupied or vacant property, then:

• You can claim a deduction under Section 80C of up to ₹1.5 lakh on housing loan principal repayment
• You are also eligible for a deduction of up to ₹2 lakh on interest

However, you cannot claim any deduction for payments made towards property taxes.

If you have opted for the old tax regime and have let out your property on rent, then you can claim the following deductions from the gross annual income (gross rent):

• Payment towards property taxes paid
• Standard deduction of 30% towards repairs
• Repayment of interest

To know more about tax implications for properties rented out by NRIs, click here. 

If you have opted for the new tax regime, then you cannot claim any deduction except for the standard deduction of 30%.

Apply for Home Loan
 

2. Loan against NRE/NRO/FCNR(B) deposits

As an NRI, you may be holding Non-Resident External (NRE) fixed deposits/Non-Resident Ordinary (NRO) fixed deposits/Foreign Currency Non-Resident Bank (FCNR (B)) fixed deposits. You can readily avail an NRI loan against fixed deposits. These loans can be availed in Indian currency and can be utilised to take care of your personal or business financing needs.

Top banks in India (such as ICICI Bank) provide you with an option to pledge your fixed deposits and avail a loan or overdraft (OD) facility against these deposits. The amount of loan, which can be availed is usually a fixed percentage of the total deposits held by you with the bank. This percentage and the rate of interest for such loans vary from bank to bank. You can apply for these loans using your internet and mobile banking applications. Please note that you cannot repatriate the borrowed funds outside India. You should get in touch with your bank for more details.

Apply for a loan against NRI FD

3. Education loans

You can support the education of your child, in India and abroad. Like a resident Indian, an NRI can avail an education loan from leading banks and government-backed financial institutions in India. ICICI Bank, for instance, extends education loans to support education of students at renowned Indian and foreign universities. Depending on the quantum of the loan, the bank or financial institution can seek a collateral from you. For an NRI to avail an education loan, apart from the standard documents required, an Indian resident co-applicant who meets RBI's Know Your Customer (KYC) guidelines is also needed.

You can avail tax benefits under Section 80E of the IT Act on the repayment of interest on education loans. Please note that this benefit is available only under the old tax regime and can only be claimed by the person who repays the loan (either the student, the parent, or the legal guardian).

Apply for Education Loan

4. Car loans

When you are in India, you might want a car for your ease or even consider buying one for your parents or children. You can avail car loans provided that the car will be used within India. Almost all leading banks and Non-Banking Financial Companies (NBFCs) offer car loans. For an NRI to avail a vehicle loan, apart from the standard documents required, an Indian resident co-applicant who meets the RBI's KYC guidelines for individuals is also needed. Additionally, some banks and NBFCs may also require a guarantor. Some of the leading banks, such as ICICI Bank, provide vehicle loans up to 100% of on-road price, with attractive interest rates, instant sanction and disbursement and tenures up to eight years.

Apply for Auto Loan

5. Personal loans

You might want to avail a loan to support your and your family’s personal needs. These could vary from taking care of medical emergencies to providing financial support for a wedding in the family or other personal needs. In such a scenario, you can avail personal loans from various banks in India. These loans are usually unsecured (without any collateral), are typically short-term (up to 60 months) and do not need a security or guarantor. Please note, different banks have different limits and terms, you should connect with your bank for more information.

Apply for Personal Loan
 

Repayment and repatriation

Repayments for all NRI loans (loan against deposits, mortgages, cars or personal loans) must be made through your NRI accounts or through the e-NACH (Electronic National Automated Clearing House) mandate from any other bank account or through remittances.

Please note that repatriation of these funds to your country of residence or to your international bank accounts is not permitted.

For NRIs, the loan is disbursed only to their NRO bank account.
 

Eligibility for applying for loans

Before you apply for any kind of loan in India, as an NRI, you should understand the eligibility and documentation criteria associated for the respective loans. To be eligible for a loan, you should:

• Qualify as an NRI/(PIO)/(OCI)
• Have an existing or open an NRO bank account in India
• Maintain a good credit score in India and the country of residence
• Provide all necessary documentation as required by the bank/financial institution

Documentation

In the application process, banks would require you to submit documentation related to your NRI status, along with proof of your identity, residential address and income. The list of documentation varies from bank to bank and is based on the type and purpose of your loan application. The list may include:

• Application form for availing loan
• Identity proof: Passport/Aadhaar card/Driving license/Voter ID
• Address proof: Driving license, passport, Voter ID and Aadhaar card
• Passport size photographs
• Foreign Account Tax Compliance Act (FATCA) declaration as applicable for the United States (US) or Common Reporting Standard (CRS) for the United Kingdom (UK), Canada, or any of the 100+ countries that have adopted CRS*
• Permanent Account Number (PAN) card
• Proof of income: Bank statements (from both Indian and international accounts) or salary slips for the past six months
• Employment confirmation: Appointment letters/job contracts etc

*The list mentioned above is indicative and non-exhaustive. These documents may differ from bank to bank. You may want to consult your bank for more details.

You can strengthen your loan application by adding co-applicants or providing guarantors if required by the bank. Based on the type of loan availed, you may be asked to provide an underlying collateral. You should conduct due diligence on the interest rate, processing fees and the tenure offered by the bank before you finalise your loan application.